Flipping Luxury Properties High End Assets

John Harcar (00:01.288)
All right. Hey, guys, welcome back to the show. I’m your host, John Harcar, and I’m here today with Tom Shallcross. And what we’re going to talk about is his real estate business, right? How to how to really grow and target high end property. Guys, remember, at Investor Fuel, we help real estate investors, service providers, really, I mean, all real estate entrepreneurs, two to five X their business. And we do that by providing tools and resources that help build a business that they want to build. And I mean, at the end, grow the business or the life they want to grow.

So Tom, welcome to our show. Yeah, yeah, I’m super excited, dig in and talk about your journey and your experience. But before we do all that, why don’t you kind of just let our audience know a little bit about who you are, you know, how you got here, et cetera.

Tom Shallcross (00:32.728)
Thanks for having me, John. Excited to be here.

Tom Shallcross (00:46.074)
Sure. My name is Tom Shallcross. I’m from the Northwest side of Chicago, born and raised here and still where we do a lot of our projects. And, you know, I came from a W-2 background. I was working a very good job, got kind of interested in real estate. Actually, Investor Fuel member Blake McCray was very instrumental.

John Harcar (01:05.512)
you know Blake, okay, Koss, yeah, no, Blake and Wendy. Awesome, awesome folks, yeah, I love those guys.

Tom Shallcross (01:09.326)
Yup. Yup. Blake and Wendy. Yeah. So we, know, that was kind of, when I first got started, I was doing some lending for him and then we were seeing like the profits he was making. was like, wait a minute, there’s something here. Like let’s, let’s, take a look at this and you know, kind of just grew from there. uh, got a, you know, I have four kids, so it’s a family of six and we live, we live off the money I make from flipping houses. And then we look to add to the portfolio every year. I just keep growing the long-term holds.

John Harcar (01:20.364)
Sure.

John Harcar (01:37.11)
generational wealth. love it. Let’s go back. What were you doing as a W-2?

Tom Shallcross (01:41.966)
It was a sales for an IT company, so kind of a white collar sales job, which was pretty lucrative, but it involved traveling. involved just weren’t in complete control over your schedule. then I was kind of doing both. I was doing real estate on the side, buying a building here or there. And I wanted to make the jump full time. Obviously, a lot of obligations, right? it gets hard to leave that giant paycheck behind.

John Harcar (01:44.747)
Okay.

John Harcar (02:08.15)
comfort.

Tom Shallcross (02:08.909)
Yeah. Comfort and you know, benefits and all the other things. Right. And you know, when COVID hit and I didn’t have to get on a plane anymore, I realized like, Oh my God, like I never want to get on a plane unless I’m wearing flip flops and going somewhere. Right. Like you just once, once that happens, it’s like, dude, I’m not, I’m not doing this anymore. Like you just, don’t realize what you don’t realize it’s what’s taken away. It’s like, Oh yeah, I don’t, I don’t want to do that. Um, and that, that’s kind of where I really started to transition and say, all right, well let’s, what, what, what are the steps that have to happen to.

John Harcar (02:10.988)
Yeah.

John Harcar (02:22.572)
All right, go to vacation. Sure.

John Harcar (02:28.524)
Yeah, 100%.

Tom Shallcross (02:36.011)
to do this full time and started going down that path.

John Harcar (02:38.764)
So, have you been in sales your whole life? Okay. put the bug of real estate in your ear? Like some folks I talked to might have like an uncle or a family member, somebody that was in real estate that they saw and like, hey, that’s cool. So I’ll start buying rentals. Like what’s your story on how you first said, hey, I’m going to start buying a property.

Tom Shallcross (02:42.081)
Yes.

Tom Shallcross (02:59.469)
Yeah, no, no family connection whatsoever. Uh, I did take, there’s a college class. I remember that was pretty, it kind of stuck with me like, Oh, this seems pretty good. Right? Like I’m young, like the time is on my side. Um, I actually right out of college is, and this is Oh, wait, when anyone can buy anything. My, you know, my job was, was about 50, 60 miles away from my house, my parents’ house at the time. And so I ended up in, I ended up just buying a small duplex out there or a small town home out there. Sorry.

John Harcar (03:19.404)
Mmm.

Tom Shallcross (03:26.317)
Right. And it was like, cause it was just cheap and it was easy and it, you know, I think it was $2,000. Right. Like, yeah. Right. Just, uh, just, you know, quality of life. Um, and then that ended up, had, you know, four or five other guys who did this, like pretty much moved in. Like it became like the after college kind of party house. And at a point I was like, wait, I’m not paying the mortgage. Like this is awesome. Yeah. I unintentionally didn’t know what I was doing. Um,

John Harcar (03:30.134)
Sheep are probably the gas.

John Harcar (03:44.843)
Got it.

John Harcar (03:49.034)
You’re house hacked. Unintentional house hack. I love it.

Tom Shallcross (03:54.38)
So yeah, that kind of got in and then, you know, work went well. I kept, you know, it was kind of always on the back of my head, but I never really put any thought into it. And then I synced up back with Blake and like I said, I did some lending for him and, you know, started to see what profits were. started to ask a little more questions and wanted to get more active and then just kind of ran with it from there.

John Harcar (04:13.472)
Got it. Were you buying now? I know we talked before on here that you you do a little bit more of the higher asset class. Are you, did you start off with the lower stuff and kind of work up or did you jump right in? How did you get into, cause you mentioned you higher end.

Tom Shallcross (04:27.671)
yeah, no, started the exact opposite. Started in the wild hundreds on the South side here, you know, buying stuff for 40 K putting 40 into it and, know, appraising out at one, you know, 40 or whatever it was, right? Like just very low buried entry, type of type of assets, much different than what we do today.

John Harcar (04:39.061)
Yeah.

John Harcar (04:45.258)
Yeah, and there are a lot of folks that listen to us that you know, that might be kind of new in the game Tell a little bit about maybe you know, when you got started after you got the bug you got that one You started to buy stuff. You started to get more into it What are some of the challenges or struggles you had starting out?

Tom Shallcross (05:02.625)
Yeah. So for me, like one of the benefits I had was I had a good white collar job, right? So like I had some liquidity. was, you know, if a project were to go bad, it wouldn’t destroy me. Right. So I could take some swings and that’s what I did. so I think, I think it’s very contextual to who you are and what your situation is and what you’re trying to accomplish. but for me personally, you know, it was finding out what am I actually good at? Right. And I was able to partner my, my partner to this day, Chris Clancy, he’s a phenomenal general contractor.

John Harcar (05:13.164)
Mm-hmm.

John Harcar (05:34.293)
Awesome.

Tom Shallcross (05:35.232)
The bigger the rehab, the more competitive we are. you so that you can’t do giant rehabs when something’s only going to ARV out at 200k. Right? So we, started re we started looking up here on the north side, you know, and a typical project now, like we, know, the rehabs we have going on there, they’re 500, 700, 800k type of just full on guts that take, you know, nine to 12 months to do.

John Harcar (05:44.608)
Yeah.

John Harcar (05:59.34)
What’s one of your, from when you started off, right? You started off flipping. mean, I’m sure you weren’t a professional just right off the bat or all that type of stuff. What’s one of the horror stories you had? Like what’s one of the biggest kind of like learning, did that really put the learning into learning?

Tom Shallcross (06:15.349)
Yeah, we got a couple and you know, when we started in the South side, you get the, you get the break-ins, you get the squatters, you get the, stealing your copper. They’re, know, all just the BS that you don’t want to deal with. you know, so a lot, you know,

Not some like, holy crap type of moment, I think like just a lot of those and the mental anxiety of it too, right? Of just the sleepless night, not knowing if your property is secured, like, you know, just, just a bunch of garbage, right? Like those no giant incident though. you haven’t had like, you know, gun pulled on me or anything crazy like that.

John Harcar (06:36.617)
Mm-hmm.

John Harcar (06:47.518)
Right, okay. So did that just kind of wear on in? You’re like, man, I need to jump up to something nicer so I can sleep a little bit more.

Tom Shallcross (06:57.269)
Yeah, mean, I’m from the North side. have a partner who’s very good at these full gut rehabs, right? Like he’s done it. so we need to be in a position where the ARVs can justify doing these rehabs. I’m from the North side. know neighborhoods here, right? And just the BS aspect of it is much lower, right?

John Harcar (07:03.116)
Hmm.

Tom Shallcross (07:18.783)
So it, there’s also like what I would call like an unofficial barrier to entry, right? It’s hard for someone to go in and, know, anyone can buy that property for 40 grand and do a cosmetic rehab, right? Like the, the, anyone can do that. like, where can you differentiate? Where can you niche out? And you know, we started, we started doing it and just kind of ran with it from there.

John Harcar (07:37.708)
Okay, what are some of the pros and cons versus your easier lower stuff? I mean, we know what some of the cons are. I guess what are maybe some of the pros that you see from moving up?

Tom Shallcross (07:49.006)
Yeah. I mean, there’s everything is bigger, right? So your opportunity to lose is higher, but your opportunity to gain is also higher, right? You, these things can be very profitable when they work in your favor. You, you’re dealing with a clientele a lot of times that they don’t really care if rates are going up, right? You know, a lot of these people are borderline F you money, right? For the people you’re selling to. So it’s like everything you wake up and scared about the, you you’re not dealing with someone who’s like nickel and diamond over every two cents. They’re

John Harcar (08:06.379)
Yeah.

Sure, sure, yeah, yeah,

John Harcar (08:16.694)
paycheck to paycheck and stuff. Yeah, you’re not dealing with those.

Tom Shallcross (08:19.349)
Yeah, now on the flip side, they are wanting everything to be perfect. There is very high maintenance, and that punch list is usually kind of like, dude, are you serious? OK, yes, ma’am, let’s get it done so we get to the finish line. Some other pros on it, would say, is in Chicago, if you’re going to go through the actual permitting system, it’s a bear. And the price of it is pretty much the same, regardless of how big the project is.

John Harcar (08:23.242)
Yeah.

John Harcar (08:39.916)
Mm.

Tom Shallcross (08:45.013)
So like you can make the same amount of money going through that process and going through just all the BS of getting a project off the ground, you know, five times compared to 15 times. So.

John Harcar (08:54.688)
Yeah, got it, got it, okay. So, now you mentioned your partner, right? Your partner is a general contractor, okay? So, he does, obviously, the work. Are you doing the acquisitions and basically running that part of the business?

Tom Shallcross (09:02.253)
Yep.

Tom Shallcross (09:10.593)
Yeah, so my main acquisitions, all the relationships with brokers, I leverage Deal Machine to send out mailers. We are out there getting in front, getting to the advance, Getting the advance, putting funding in order, and putting the actual deal together to make sure does this thing pencil? What are our outs? What’s our worst case and best case scenario? Looking at the floor and ceiling.

John Harcar (09:33.718)
Mm-hmm.

Tom Shallcross (09:34.218)
know, a lot of the way I would describe it is before we start construction, I’m heavily, heavily involved. then once we get our permit approved and we start, it flips 180 where it’s mostly him. I’ll have a few comments here and there. then once we get to disposition, it kind of circles back to me. then the cycle continues.

John Harcar (09:47.976)
And you’re lining up the next one.

John Harcar (09:57.81)
Is it just you guys? I do you have other folks on your team?

Tom Shallcross (10:01.013)
No. So I’ve had, I’ve had VA’s to make phone calls and to do data scrubbing for me. I’ve had like fractional bookkeepers, like people I’ve hired for the summer just to help out with some of the stuff. but no, it’s just, just us rocking and rolling. We’re, pretty slim. We do, we do a lot without employees.

John Harcar (10:17.492)
Okay, awesome. You mentioned the deal machine and tell folks that don’t know what deal machine is what it is.

Tom Shallcross (10:25.181)
I’ll give them a plug. I don’t even know anyone over there. So they’ll get a free plug out of this. I forgot where I got introduced to it. It might have actually been Blake. Someone introduced me to it and it’s great. You can do all your data scrubbing there. So you can pull the list of whatever you want, know, absentee owners in this area. Like you can pull all this list, the list like you would with, you know, a lot of these other products out there. But I think what’s different is a couple of things. One, they will, you can set up sequences. So like, Hey, I want this to get mailed every, whatever.

John Harcar (10:27.692)
Yeah.

Tom Shallcross (10:54.987)
five weeks, blah, blah. And the mailer will have their property on it, right? It’ll have the, it’s, just an attention grabber, that you can customize. then on top of like doing your set list, if you’re just driving from one project to another, you see a property that looks like, my God, this thing, no one lives here. This thing’s distressed in an area where there’s really not distressed properties right there. You can pull over, click on it and just hit start mailer. And then they’re in the sequence. within like, yep. So within like 10 seconds there,

John Harcar (10:59.84)
Yeah, I a picture. Mm yeah.

John Harcar (11:19.498)
Okay, so that’s the tool you use to do all your marketing.

Tom Shallcross (11:25.217)
they’re getting mails from you now, right? And then it’s pretty slick.

John Harcar (11:26.774)
Got it.

Are you only doing mailers? I mean, I know you said you had people making calls or whatever. mean, did you just kind of put all that aside and say, hey, I’m just going to mail? Or do you still do like text? you do any type of SEO?

Tom Shallcross (11:41.162)
No, if we don’t do any SEO because our area is so specific, right? If we were doing all of Chicago land, that would make a lot more sense. we’re so, we’re so niched in this little area. It’s much more brokers, wholesalers. you know, we really focus on those relationships. Anyone, even though like I’m licensed, any, you know, if a broker brings us something,

John Harcar (11:44.832)
Mm.

Tom Shallcross (12:01.001)
We’ll let them list it then on the backend. Like we heavily entice them to make sure that we are the first call when they know like, Hey, someone in my office said that this is coming. Like, do you want the first crack at it? So we’re, we want to make sure that we’re top of mind there. We have a podcast here in Chicago that, you know, we really focus on the locality.

So we get you know that that unintentionally becomes kind of a deal magnet for us as well And it’s it’s just a lot of different ways. There’s no I don’t have some set Yeah, we just spend this amount and this much comes through the door like it’s Sometimes it’s it’s everything hitting at once and sometimes like man. We need a deal right now

John Harcar (12:23.18)
Mm-hmm.

John Harcar (12:34.836)
Yeah, no, got it. are you also buying, are you buying from any other wholesalers or people that come out try to bring deals to you? Yeah, okay, very cool. What kind of volume you guys doing?

Tom Shallcross (12:40.798)
Absolutely, yes.

Tom Shallcross (12:45.709)
So we’ll do like this, this year we’ll do, we’ll deliver four projects. We will have like six or seven going. There’s got something that I’ll carry in the next year. These projects are nine to 12 months, right? Like these projects are, you know, you, like I said, it’s a 500 K rehab and 800 K rehab. they, they’re, they’re a commitment. Um, so this is about as much as we can do. We, we delivered, we finished, you know, a full gut of a six unit building to hold. And the other ones are all, all flips that we’ll be delivering.

John Harcar (12:54.826)
Mm-hmm. Okay.

John Harcar (13:15.084)
Are you using private money, hard money, your money?

Tom Shallcross (13:20.043)
Yeah, all the above. So we got a local partner here, Renovo. I’ll give them a shout out. They’re awesome. they’re great to work with and the more you do with them, it’s like getting like hotel points. Like the more you do with them, like the more, the better they treat you and just very, very flexible, very, you know, a lot of the scaling to them. I have private investors, I have my own funds and it’s usually just kind of a hodgepodge of what makes the most sense.

John Harcar (13:24.736)
Awesome.

John Harcar (13:30.561)
Yeah.

John Harcar (13:42.614)
Got it.

When you, what is some maybe advice, like if someone was going out and they’re trying to go out looking for funds and looking for money, right? Maybe they want to get into that high end stuff. I mean, what is some advice you would give them or maybe mistakes that you made when you started doing that that could help out, help people out.

Tom Shallcross (14:01.643)
Yeah. The mistakes as I’d say is like you almost, you’re, it’s human nature. You’re going to initially underestimate things. We still do it to this day. Right. Even just the holding costs on this. If you just sit down with someone and break down, this is your holding costs for 12 months. Right. How, where’s the money for that coming from? Right. This thing goes 50 K over budget. Where’s the money for that coming from? Like,

the amount of liquidity needed to get these things to the finish line is usually if you would just ask someone at a meetup, what do think the liquidity is to get this done? They’ll undershoot it, right? It’s, always more than that. So I think being well set up there and then going back to the earlier part of the question, like if they’re looking to go out there and do this, like they have to have some sort of proof of concept, whether that be partnering with someone who’s done it before some success doing smaller type deals. Like if you’re going to take someone else’s money, like you, you,

John Harcar (14:28.851)
Yeah.

Tom Shallcross (14:49.433)
can’t, they can’t be your guinea pig. Like you have had to have done this multiple times. Like you need, it’s kind of a chicken and egg, but you got to have some proof there. One for them to believe in too. Like you can’t F it up, right? You have to deliver. So, you know, I take it very seriously and just, you know, do whatever you can before you ask for money, because you have to be prepared. You have to, that project has to go well. There’s no, there’s no other way.

John Harcar (14:53.578)
Right?

John Harcar (14:59.488)
Night.

John Harcar (15:12.876)
So are you making, you like, every time you go to a lender bringing like a portfolio of, these are all the things I’ve done, show you kind of all my, my wins.

Tom Shallcross (15:22.509)
Yeah, a lot of it is, you know, it’s a lot of it’s friends and family. Like we don’t, you know, I don’t have to go out there and say like, Hey, like we’re looking to raise like here, you know, come see how great we are. A lot of it is, you know, I don’t want say it’s easy, but like we’ve been doing it now for seven, eight years with some of these people. It’s a text message of, Hey, this is coming. Are you interested? And they’ll say yes or no. Like we have our funds tied up or whatever. And then you just move on to the next one. But

John Harcar (15:32.268)
Right.

John Harcar (15:42.731)
Right.

Tom Shallcross (15:48.302)
to originally get in that game, think, yes, that’s probably the right way to do it. Just let people know what you’re doing. If you have a successful, even if it’s a small flip, like let the world know that. So when that time comes, it could be two years from now, four years from now, real estate sexy, man. People want to be a part of it, right? People want to be a part of it they don’t want to do the work. Yeah. And they don’t want to be the one doing the work. like there’s, there is a lot of opportunity as long as you can provide the value they’re looking for.

John Harcar (15:56.672)
Yeah.

John Harcar (16:02.956)
They do. They do. No, I 100 % agree on that.

John Harcar (16:12.812)
So same question, like the advice and mistakes on making that move up to higher end.

Tom Shallcross (16:20.801)
Yeah, I’d say like this is something we kind of fell into. I think, you know, there’s a Gary Keller quote, success is doing the right things, not everything. Right. And so this just happened to be the right thing that we were very good at. And so we just went a hundred percent in on it. Right. And, know, you work hard, but you’re working hard at a specific goal. you know,

John Harcar (16:29.26)
you

John Harcar (16:35.552)
Nice.

Tom Shallcross (16:42.157)
I did for some people that might be wholesaling, right? It might be doing, you know, these, these smaller flips and CD areas. Like that might be what they’re very good at and they have the stomach for it. Right. I, again, it’s contextual, but I think you need to figure out like, all right, what, where, you know, where am I good? Like where, where do I have an advantage here? Like if this is a basketball analogy, like if you’re six, eight, like you’re not going to sit there shooting three pointers, you’re to go work on rebounding. Like it’s just how it works. Like you have an advantage.

John Harcar (16:51.232)
Yeah, yeah.

John Harcar (17:06.7)
Yeah, it’s a good, good analogy. I love it. What, what, what, what, maybe, things to people need to look at when they’re making that transition to bigger, rehabs.

Tom Shallcross (17:22.645)
Yeah, man, I would definitely say get with people who have done it before. Like you’re always, you’re always going to, if you’re making a list of things, like you’re going to the grocery store, like the list is never going to have too many things on it. And like, I actually don’t need this. Like the list is going to have what you think you need and then it’s going to have, yeah. And we need X, Y, Like it’s human nature. You’re almost always going to undershoot it. Going back to like what we said with liquidity. like,

John Harcar (17:39.04)
Mm-hmm.

John Harcar (17:46.571)
Yeah.

Tom Shallcross (17:47.438)
you know, you’re, you’re always going to have these things that are, you’re just not used to even like in Chicago, like the permitting process is pretty funky here, right. And getting through your roughs, like it’s, you know, just knowing that process and knowing what they’re expecting and not having the project held up because, know, if you’re borrowing money, a four week delay, it’s kind of a big deal, right? Like that’s all right. I just lost 10 grand for nothing. Sweet. Like not awesome. so I think just, I would go through the process with someone who’s done it before, cause there’s so many,

John Harcar (17:54.774)
Mm-hmm.

John Harcar (18:05.91)
Yeah, yeah, yeah.

Tom Shallcross (18:16.941)
So many ways these things can fail. know, like when a wholesaler brings us something and they’ll be like, you know, oh, why can’t you, you know, why can’t you come up on your offer? Like you’re making so much on this. And it’s like, dude, we have to like this. Yeah. Like on a spreadsheet I am like, but like in reality, in reality, dude, like, you know, the price drops on these things are 50 K. If you go up there and like, we’re to sell at 1.9. Like the price, if it doesn’t move the first couple of weeks, the price drop is to 1.85, like 50 grand just gone.

John Harcar (18:27.024)
Well, because we don’t know if we’re making that much on it. Yeah, on paper it looks great.

John Harcar (18:43.248)
So yeah, it’s not like five grand off. It doesn’t work.

Tom Shallcross (18:47.233)
Yeah, like, you know, there, there’s just so many, there’s so many variables. Like you have to, you’re not being greedy. You just have to go in with all these. It’s gotta be healthy on the front end because these things will happen to you.

John Harcar (18:58.4)
Yeah. Yeah. See make money on the buy.

Tom Shallcross (19:01.857)
Yeah, like you got to come in with that, that ability to, you got to come in knowing like, all right, like I have, this is my floor, right? Right? Like this is X, Y, and Z can happen to me and I can still walk out of this thing. All right.

John Harcar (19:15.02)
Yeah, yeah, you got to plan for the worst. Where do you see your business going? And I mean, I mean, it sounds like you’re doing fantastic up doing high and stuff. I mean, do you have a line of growth that you’re looking to go and hit? Are you kind of maybe looking to expand? I mean, what is what’s your plans?

Tom Shallcross (19:31.666)
You know, we like the path we’re on here.

You know, and I’ve been part of some, you know, I’ve been part of some larger deals, like, you know, buying the 40 units, I’ve courtyard buildings, you know, I’m one of the quote unquote GPS on it. I still like the idea of buying my own six unit, eight unit, four unit building. Like I, know, when they’re that small, you have more control. get to, know, you get to rip out the boiler. You, know, you, you can completely gut these things and make them awesome. And you you own a hundred percent of it or 50 % of it as opposed to owning 6 % or whatever it is on these

John Harcar (19:40.705)
Mm-hmm.

Tom Shallcross (20:04.291)
bigger deal. So I don’t, I don’t have this grand scheme of like, all right, I’m going to start buying bigger buildings. I think, I think what we are doing, we just need to do it better and do it more. Right? Like just get better at what we’re doing and continue down that path. And you know, it’s, it’s a long game, right? You know, you wake up one day and it’s like, all right, all those six units added up and they’re, you know, now they’re paid off. They’re paid down, whatever. Like you just look at it as a 20 year horizon.

John Harcar (20:25.771)
Yeah.

Yeah, no, and I love that. If folks want to talk to you a little bit more about kind of what you’re doing and maybe how you made that transition to, you know, higher end stuff, how do they get out, how do they get in touch with you?

Tom Shallcross (20:40.353)
Sure. So I’ll give the quick plug. Our local podcast here is straight up Chicago investor. We focus specifically just in Chicago. If you’re investing in this area, it’s very, very valuable information. You can find me there. I could give you my contact to put in the notes or whatever the best way to do that. But happy to have a convo with anyone looking to do something along these lines.

John Harcar (21:00.086)
Sure.

John Harcar (21:04.074)
Yeah, I’ll put all your contact information in there. And guys, I hope you enjoyed the conversation today in the podcast. mean, you got some good nuggets in there. I like the fact that you found your niche, right? A lot of people bounce around at different things. You have your niche, you’re running with it, and it’s successful. And to me, that’s awesome. So congratulations on your success, man.

Tom Shallcross (21:23.127)
Thank you. I appreciate it. appreciate you having me, John.

John Harcar (21:25.066)
Yeah, I appreciate being on the show. And guys, if you need to reach out or want to reach out and pick his brain on stuff, give him a call. Hit him on social media, however. But hope you guys enjoyed this episode, and we’ll see you on the next one. Cheers.

Tom Shallcross (21:40.12)
Thanks.